Analysis – Wise up to the environment.

At about the same time Michael Meacher, the then environment minister, took 22 FTSE 100 companies to task for their poor environmental reporting.

This is an enormous change. A decade ago, environmental concerns were seen as the preserve of a few idealists. But there can barely be a company in the country that is not aware survival, success and long-term value depend on a lot more than short-term profits.

Steadily, environmental issues have pushed to the fore. Most significantly, these issues have become part of a wider package of concerns – the phenomenon known as ‘sustainability’ – that are high on the business agenda.

Sustainability is the recognition that the actions of corporations of all sizes have a significant effect on their employees, shareholders, customers and society at large. The way they manage these influences will have a major impact on their reputation and consequently on the value of the company.

A strong corporate reputation gives rise to a virtuous circle. The company is the first choice for talented workers, the first choice for customers and the first choice for investors. In today’s fast-changing and information-rich business world there is the ever present risk that the virtuous circle could be transformed into a vicious cycle. Make one mistake and corporate reputation is damaged, generating negative publicity, which in turn affects sales and the willingness of people to work with you.

Moreover, perception can be a key driver of reputation. Corporations are like people – a mixture of strengths and, to some extent, weaknesses.

When things are going well, others focus on your good points. When things are going badly, they become critical.

Governments, stakeholders, potential investors, the media and the world at large are watching business and judging it on its financial, environmental and ethical performance.

Sustainability is by no means an issue exclusively for leading global corporations. Companies of all sizes need to protect their reputation and smaller companies, for example, can use flexible working practices to attract high quality staff or community involvement to help project their commitment to their marketplace.

Increasingly, companies say it’s not enough to have an ethics code or an environmental reporting policy. Stakeholders need to know that code is being followed. They want results. The demand for assurance services in the area of sustainability will continue to grow.

In the past six years, world business and the accountancy profession have made good progress in environmental reporting. In 1993, just 26% of 570 UK companies studied were addressing environmental issues in their annual reports.

Since then, large companies in particular, have made greater efforts to address environmental reporting. A significant number (such as BP) now publish separate environmental reports as a matter of course. Some – the Co-operative Bank, for instance – have become widely admired for their efforts in environmental and ethical reporting and have based their reputation on sustainability issues. But there is still a long way to go.

Medium-sized and smaller companies have not yet embraced environmental or sustainability reporting with enthusiasm.

This is where accountants can make a significant contribution. In 1995, it was said that the way forward in environmental reporting ‘is for the accountancy profession to get its act together so as to provide the leadership necessary.

Providing high quality, professionally managed and properly regulated environmental auditing and reporting services represent a major long-term opportunity for the accounting profession’. This still holds true. Sustainability should not be farmed out to a manager or team below boardroom level. It is tied to the value of the corporation and if that isn’t a boardroom issue, what is?< Sustainability has become an integral part of how we do business. It is an issue for everyone and accountants, as a driving force in in the boardroom, will be in the front line of discussions.

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